THE PESO strengthened versus the dollar on Monday after the central bank’s decision to cut rates and on the continued progress in vaccine candidates against the coronavirus disease 2019 (COVID-19).
The local unit closed at P48.205 against the dollar on Monday, rising by 2.5 centavos from its P48.23 finish on Friday, data from the Bankers Association of the Philippines showed.
The peso opened Monday’s session at P48.23 per dollar, which was also its weakest showing for the day. Meanwhile, its intraday best was logged at P48.165 against the greenback.
Dollars traded declined to $425.4 million on Monday from $660.6 million on Friday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso rose after the Bangko Sentral ng Pilipinas (BSP) slashed key interest rates anew last week.
“The peso was stronger after the surprise BSP rate cut that further lowers borrowing costs and the resulting latest gains in the local stock market to the highest in almost nine months,” Mr. Ricafort said in a text message.
Meanwhile, a trader said lower interest rates will spur consumer spending to drive economic growth.
The BSP Monetary Board on Thursday trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by 25 basis points (bp) to 2%, 2.5%, and 1.5%, respectively.
The latest easing move followed a “prudent pause” by the central bank since its June meeting. The central bank has already cumulatively lowered interest rates by 200 bps.
Mr. Ricafort added that demand for the peso strengthened as developments in possible COVID-19 vaccines improved investment sentiment.
“The peso was also stronger with additional developments on possible vaccines for COVID-19, resulting to improved market risk appetite,” he said.
For today, Mr. Ricafort sees the peso moving from P48.16 to P48.26 versus the dollar, while the trader expects it to range from P48.15 to 48.25. — KKTJ with Reuters